On October 17, 2025 the Ontario Energy Board (OEB) released the Regulated Price Plan (RPP) prices for the year starting November 1, 2025. The RPP prices are the rates that residential and small commercial customers pay for electricity. What was most notable was the 29% increase in these prices. The OEB has consistently used consultants (in this case Power Advisory) to forecast the price of electricity for the purpose of setting RPP rates. These forecasts have historically been quite accurate so I have no reason to question the 29% increase estimate.
To offset the impact of this 29% increase, the Government of Ontario has increased the Ontario Electricity Rebate (OER) from 13.1% to 23.5%, a 79% increase. This has led to questions about the impact of this on the cost of this electricity subsidy.
I, or rather Google Gemini, estimate the total subsidy to have been around $7.4 billion in the 2024-2025 fiscal year. This subsidy is made up of the cost of the Green Energy Act (a little over $3 billion), the OER (around $4 billion) and a few other smaller subsidies like the rural rate protection. During this fiscal year the average OER discount was 16.7% so increasing the discount to 23.5% would add another $1.6 billion. The total subsidy would now be $9 billion.
Whether this subsidy is a good use of taxpayers’ money is a significant question. As with most things, there are both pros and cons.
The pros of the electricity subsidy include:
- From the government’s perspective, the subsidy is working. The cost of electricity does not appear to be an election issue for the majority of Ontarians.
- The subsidy is transparent. It is not hidden like the last Liberal government scheme which involved using OPG and trying to keep the debt off of the government’s books.
- In my mind, there are valid reasons for the portion of the subsidy covering the excess costs of the Green Energy Act. The Act was a political mistake so can be paid for by taxpayer money. It is very slowly shrinking and will go away over time.
- The subsidy is progressive from a taxing perspective. It takes a cost that is regressive, electricity is a bigger portion of the cost of living for lower income Ontarians, and replaces it with an income tax cost which is generally higher as a proportion the higher the income.
The cons of the electricity subsidy include:
- Subsidies distort consumer’s purchasing behavior. By making electricity cheaper the subsidy encourages more of its use. While some might argue that this is a good thing as encourages electrification, the reality is much of the additional use will be waste rather than conversion from carbon sources of energy.
- The subsidy means greater taxation which, in turn, means more private investment is crowded out. Given the productivity challenges in Ontario and Canada, more private investment is needed.
- The OER portion of the subsidy is only available for residential and small commercial customers. Larger commercial customers still pay the full price.
- Subsidies encourage lazy decision making. If those responsible for generation decisions know that any cost overages will be covered for most consumers by the subsidy then they have less incentive to closely manage the cost of the generation.
While I have great sympathy for those for whom a higher cost of electricity would be a hardship, I cannot help but thinking that this path is the wrong one and will lead to bigger problems in the future.